Income inequality is not a problem in and of itself. As long a people earn their income through honest, peaceful and voluntary exchange, then there is no moral reason for our government to redistribute that wealth. What is a problem is when government places its thumb on the scale and unfairly helps the rich to get richer, or hurts the poor and makes them poorer. To the extent that a person gains wealth by unequal preferential treatment by government, it is morally correct for government to use its force to take away that wealth.
One good example of the many unfair government policies that wrongly favor the rich is the special low income tax rate on “carried interest” income earned by hedge fund managers. They call it carried interest, but it is nothing more than a bonus based on performance. In any other situation, this type of income is taxed at regular income tax rates. Somehow, hedge fund managers have sold politicians on the idea that carried interest is a special kind of income that should be taxed at lower rates. Another example is the Oil Depletion Allowance for oil companies. Another is farm subsidies for rich farmers. We do not need to raise tax rates on ordinary income, we do need to do away with the unfair preferences, tax breaks, and subsidies that go mostly to the wealthy.
A good example of government policy that hurts poor people is that of keeping interest rates low in order to prop up housing prices. If housing prices had been allowed to fall to their free market levels, housing would be much more affordable for poor people. Instead, our government tries to fix the problem that it helped to create (unaffordable housing) by giving rent subsidies to the poor – creating more dependency on government, but not fixing the underlying causes of the problem.
To misquote Walter Scott, “Oh what a tangled web we weave when first we practice to use our government to achieve social goals.” The solution to many of our economic problems today is to reduce the size and scope of our government. Many unfair crony capitalist subsidies and tax breaks exist because our government has expanded far beyond its Constitutionally limited powers. The primary just powers of government are to protect our lives, liberty and property; and to resolve disputes. The scope and powers of our current federal government are clearly way beyond the limited government that our founding fathers created. Lets start by closing unfair tax breaks and lowering spending to match.
Speculators are being blamed for increases in ethanol RIN credits! Renewable Identification Number (RIN) credits are issued to manufacturers for every gallon of ethanol that they blend into gasoline. All manufacturers are required to meet targets for blending ethanol into their gasoline – in order to meet national Renewable Fuels Standards. If they fail to meet their targets, they have to pay substantial penalties. Some manufacturers exceed their targets so they have excess credits that they are allowed to sell. Others fail to meet their targets and either have to purchase credits from other manufacturers or pay the penalties. If, for the entire market, it appears there will be a shortage then the price of the credits will go up. If it were possible for a few speculators to “corner the market”, then they might be able to hold out for higher prices. But, the there were truly a shortage, then manufacturers who have excess credits could just as easily do the same. In either case, this puts pressure on manufacturers to blend more ethanol. If there is a shortage of ethanol, then the price of ethanol should rise. If the price of ethanol rises than ethanol producers will try to increase their production to capture more profit. In any case, the credits are doing what they are supposed to do: reward manufacturers who blend excess gallons and penalize those who blend less than their target. If the entire market is below the target, then there will be incentives to produce more ethanol. Speculators help the market to work as it was intended. The real problem here is the entire Renewable Fuel Standards that uses force, in the form of money penalties, to make everyone use more ethanol than they would in a voluntary market. This is a classic case of unintended consequences that occurs when people discover, as Friedrich Hayek wrote, “…how little they know about what they imagine they can design.”
Maybe it would be best to let the Sequestration spending cuts to take effect. It appears that elected politicians are unable to make significant cuts to any specific federal spending items.If cuts could be prioritized, here would be my short list in order of priority:
- The Medicare eligibility age should be coupled with Social Security and they both should be gradually moved to age 70. The federal government should not be responsible to pay for 15 – 30 years of retirement for healthy adults. (see below)
- Freeze the dollar amount of federal spending on Medicaid – block grant the money to the states and let States decide on the priorities. There will always be more demand than there is supply for free medical care.
- Cut military spending, in actual dollars, by at least 5%. Let the defense department decide on priorities to give us the best defense that the budget can buy. We would still have greatest defense on Earth.
- Eliminate the Dept. of Education – leave education to the states entirely.
- Limit farm subsidies to $50,000 per farmer maximum, $100,000 per family maximum. Phase out all subsidies for farmers who have a Adjusted Gross Income between $100,000 and $200,000. Require 100% of the cost of crop insurance to be charged to the farmers. Why do we keep paying subsidies to farmers when they have record profits? Something is wrong.
- Cut the FEMA budget by 50%, and make States pay a 50% co-insurance payment for all federal money that flows into any State. States would be much more efficient, and there would be much less abuse and fraud.
- Eliminate subsidies and special tax breaks for all forms of energy. All energy producers fight to protect their subsidies by claiming that the other forms of energy get subsidies and all they want is a fair playing field. Well, lets make the playing field very fair – no subsidies for anyone.
- Eliminate spending on arts, and humanities, public broadcasting, etc. Contributions to these kinds of organizations should be left to charitable organizations.
I’m sure the list would be different and much larger if I took enough additional time.
According to data compiled by the Social Security Administration:
- A man reaching age 65 today can expect to live, on average, until age 83.
- A woman turning age 65 today can expect to live, on average, until age 85.
And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.